NextSource Materials’ share price has almost quadrupled in a month

NextSource Materials (NEXT.TO) has put in a stellar performance in the past few weeks as its share price moved from C$0.06 in December to a high of C$0.22 earlier this week for an increase of 267%. Surprisingly, this happened without any relevant news (other than NextSource’s announcement it has now also registered SuperFlake as registered trademark in Japan and whilst this is an excellent move to create branding and brand awareness, this by itself does not explain the run-up of the company’s share price).

We can probably attribute the share price increase to the market (finally) starting to catch up on NextSource’s plans to develop the Molo graphite project which has a pre-tax NPV8% of US$34M (C$42M) as offtake negotiations are ongoing. The company is now also in the middle of the permitting process in Madagascar as its most recent MD&A report confirmed NextSource remains on track to produce its first graphite at Molo in July 2018 (but as delays are very common in the mining sector, we wouldn’t really count on the July target to be met and are expecting a few additional months of delay).

NextSource is currently in the process of converting the exploration permit into an exploitation permit which is required before developing the Molo mining activities. Meanwhile, the Environmental and Social Impact Assessment should now also be completed (the official status was ‘nearing completion’ as of halfway November. The ESIA review process is expected to take six months and is supposed to be concluded this month (February).

Trenching for the Bulk Sample on Molo, May 2013

Although we remain firm believers in the Molo graphite project (whilst the Green Vanadium project also comes back into play now the vanadium prices have been increasing again), it could make sense to take some money off the table. We initiated coverage at C$0.0.07 per share, and as the share price is now up 136%, selling less than half a position would allow you to recoup your entire investment and you could let the free shares ‘run’. Just a thought! US-based investors should keep in mind the company’s ticker symbol on the OTC market has now been updated to NSRCF.

We will catch up with NextSource’s management in Toronto at the end of this month before the PDAC conference begins, and we hope to have a better idea about timelines and permits by then!